Suncorps wary of aggregators

Suncorp’s head of personal insurance, Mark Milliner, has warned against the emerging presence of aggregators, saying the discount prices found on comparison websites are unsustainable and users are trading adequate protection for price.

“Aggregators have made much of being the consumers’ champion by offering cheaper insurance but they’re not telling the whole story," he said.

“Early price cuts in response to the introduction of aggregators eventually become unsustainable and those insurers who have stayed in the market will begin to raise prices again."

The emergence of car insurance comparison websites has threatened the margins of insurance giants
Suncorp
and
Insurance Australia Group
.

The so-called “aggregators" have reshaped the insurance industry in the United Kingdom by allowing people to better compare prices, thereby pushing down premiums.

Mr Milliner drew on the UK market, where the entry of aggregators has not resulted in long-term lower premiums, to support his prediction that prices would rise.

In the past four years, average motor premiums in the UK have risen, with a 30 per cent increase last year.

Insurance Australia Group chief executive
Mike Wilkins
said aggregators reduced risks to the “lowest common denominator" and didn’t necessarily capture all the features and benefits of individual policies.

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“Taken at the extreme, we believe that aggregators can produce information which is inaccurate and potentially misleading to the consumer," Mr Wilkins said after the annual general meeting last week.

The UK regulator, the Financial Services Commission, has criticised UK aggregator sites for lack of transparency, particularly for failing to explain the commercial relationships they have with insurers.

The provision of inconsistent or wrong information, and insufficient advice to consumers to consider the features of individual products were also cited by the regulator.

Suncorp claims its analysis of emerging price-comparison site Just-Ezi found the price quoted on its website for an AAMI policy was 70 per cent higher than the actual AAMI price.

“We won’t work with commission-motivated aggregators that mislead customers and can potentially create a market that sacrifices protection for price," Mr Milliner said.

Australian aggregators have struggled to copy UK success as local market concentration – IAG and Suncorp control more than 70 per cent of the market – has made it difficult to get scale without the co-operation of incumbents.

But the entrance of foreign players and the move by retailers to offer insurance could help aggregators if partnerships increase the relevance of these sales platforms.

Another concern expressed by Mr Milliner is that the purchase of insurance via aggregators will stifle innovation and leave consumers in the lurch when they make a claim.

“Aggregators kill innovation because they commoditise insurance products," Mr Milliner said. “They reduce insurance to the lowest common denominator of price, not taking into account that insurance is not a one-size-fits-all product."

The Insurance Council of Australia estimates that more than 70 per cent of Australian households are underinsured.

Extreme weather in the past 12 months, such as hailstorms in Perth and Melbourne which resulted in claims topping the $1 billion mark, have increased scrutiny of product coverage. Mr Milliner said smaller providers promoted by aggregators might lack the resources and experience to deal with severe weather conditions. He also said the emerging presence of insurance comparison sites suggested price was the only policy differentiator, which “couldn’t be more wrong or misleading".